TMT(TECH MEDIA AND TELCO) DIGEST | Alliance Marketing
Power of Ecosystems!
Indeed, the business landscape has undergone significant changes over the years, and the dynamics of competition have evolved. While competition remains a fundamental aspect of the business world, the traditional notion of arch-rivals constantly battling each other has diminished to some extent. Several factors have contributed to this shift:
1. Changing Consumer Demands: Today’s consumers have become more discerning and diverse in their preferences. They seek personalized experiences, innovative solutions, and ethical practices. Meeting these complex demands often requires a collaborative approach rather than direct rivalry. Companies recognize the need to adapt and provide value by understanding and addressing these evolving customer needs.
2. Resource Scarcity and Cost Constraints: As industries mature and resources become scarcer, the cost of research, development, and production tends to increase. Companies often face common challenges in securing raw materials, talent, or intellectual property rights. Collaborative efforts, such as joint ventures, partnerships, or shared research initiatives, can help mitigate these challenges by pooling resources and expertise.
3. Synergistic Growth Opportunities: Collaboration allows companies to leverage each other’s strengths and capabilities, unlocking new growth avenues. By working together, organizations can access complementary markets, share distribution channels, or combine technologies to create innovative products and services. This cooperative mindset fosters a win-win approach, enabling mutual growth and value creation.
The business landscape has witnessed instances where companies that were once competitors have become willing to collaborate and even form strategic partnerships. This shift can be attributed to the recognition that meeting customer demands and preferences often requires a more cooperative approach. The example of Apple and Microsoft partnering to make Microsoft Office available on Apple devices is indeed a significant illustration of this trend. It marked a departure from their historical rivalry in the personal computer market. Apple, known for its closed platform ecosystem, realized the importance of catering to customers who relied on Microsoft Office for their productivity needs. By allowing Microsoft Office to run on Apple devices, they expanded their target market and provided a more seamless experience for their customers, and potentially expanded their customer base.
This collaboration demonstrates how companies can put aside their differences and prioritize customer satisfaction and market growth. It highlights the understanding that working together and leveraging each other’s strengths can lead to mutually beneficial outcomes. In a sense, these companies become “frenemies,” cooperating when it aligns with their business objectives and customer demands.
Erich Joachimsthaler in his book “The Interaction Field”defines exactly that. The evolving nature of the business world often requires companies to adapt and form partnerships to remain competitive and meet the complex needs of customers. By combining their strengths, companies can create win-win scenarios that drive growth and value creation. True “Value” can be created by companies when they walk away from traditional business models of growth like differentiation, profitability, and revenue and instead look at the problems that they are solving for their customers or society in general. Customers no longer want the shiny new product in the market. Today they are more interested in the problem that the product can solve.
However, to unlock the full potential of value creation, companies must build strong bonds within their Interaction Field. This field includes the company itself, suppliers, partners, competitors, government agencies, observers, influencers, and independent researchers. When these bonds are strong, companies experience unstoppable momentum and growth, known as “Velocity” according to Erich Joachimsthaler.
- Collaboration with suppliers and partners allows access to resources and innovation.
- Engaging with competitors fosters shared insights and mutual growth opportunities.
- Government agencies provide support and regulatory guidance.
- Observers and influencers offer market insights and amplification.
- Independent researchers contribute unbiased analysis and validation.
Through collaboration within the Interaction Field, companies can tap into a network of expertise, resources, and diverse perspectives. This fosters agility, adaptation to market dynamics, and meeting complex customer and societal needs. By embracing Velocity, companies transcend limitations and achieve sustained success in value creation.
There are many companies, especially in today’s digital age that has seen this Velocity by embracing their Interaction field. The more the interactions the higher the velocity. In his book, Erich highlights that Velocity is a function of primarily three things Network Effects, Virality, and Learning Effect.
1) Network Effects
Network effects refer to the phenomenon where the value of a product or service increases as more people use it. In other words, the more users a platform or network has, the more attractive it becomes to new users. This positive feedback loop can create a self-reinforcing cycle of growth and adoption. AirBnB is the poster child for success with Network Effects. Airbnb wanted to solve the challenge of affordable, clean rental living for a limited time without the hassles of expensive hotel rooms or untrustworthy, filthy dorm rooms. It needed a few initial users to signup for their services and a few more customers to use and share their feedback and the success started to kick in as more and more people read the reviews and understood the benefits of hotels. All AirBnB did is provided a platform for homeowners to earn money and travelers to find and explore new living options.
2) Virality
Virality refers to the rapid spread of information, ideas, or products through social networks or other channels. When something goes viral, it gains significant attention and popularity within a short period. Virality often occurs when users share content or experiences with others, amplifying its reach and impact. All social media platforms are growing because of viral usage. If we look at Youtube as a platform, it has been growing because of the content which creators on the platform have been sharing. Youtube retains these creators with a strong business model based on advertising but they also have addictive algorithms that keep showing similar videos and keep viewers hooked on the platform making content go viral.
3) Learning Effect
The learning effect, also known as the learning curve, describes the improvement in performance or efficiency that occurs as individuals or organizations gain experience or knowledge in a particular task or domain. As people become more familiar with a product, process, or technology, they become more skilled and efficient, leading to increased productivity and better outcomes. Tesla is a good example of a company that introduced and commercialized the concept of electric vehicles. Before Tesla, buying electric vehicles was never thought to be possible for an average buyer. Today every car company is thinking about Tesla as they are building new vehicle production lines. Tesla with its new partnership with Ford and GM on sharing its charging stations — is growing to become a platform to provide car makers with the infrastructure needed to sustain electric vehicles. It is solving the problem of sustainable mobility and as people learned more and more about it, the adoption has increased tremendously.
The concepts of network effects, virality, and the learning effect are interconnected and profoundly impact business success and growth. Network effects create a cycle where more users attract more users, driving exponential growth. Virality amplifies this effect by rapidly spreading products or messages. The learning effect complements these phenomena by enabling continuous improvement and adaptation.
Companies recognize the importance of building strong interaction fields and promoting collaboration through ecosystem programs. They leverage habit-forming products and embrace the concepts of network effects, virality, and the learning effect. In an increasingly interconnected world with complex challenges, companies understand that solving global problems outweighs mere economic profitability.
Companies are working on building smarter cities, advancing connectivity like 5G, developing connected and electric cars, implementing sustainable farming and manufacturing practices, and creating immersive entertainment. To bring these visions to life, companies must collaborate like pieces of Lego blocks, with each component fitting perfectly to set the momentum that becomes difficult to replicate.
While some companies work in silos, others align their goals around their interaction field. By focusing on large, complex problems, these organizations bring meaningful solutions that keep the flywheel spinning and gaining speed.
